Auditing Your Employee Benefits Program
Posted on 12/15/20 By Lorman Team
Organizations that offer comprehensive employee benefit plans (EBP) are more likely to attract and retain high-quality employees than businesses that offer their workers little to no benefits.
However, offering the bare minimum benefits doesn't cut it. Your employee benefits plan should reflect your company's principles and, more importantly, provide value to your workforce.
Performing annual employee benefit plan audits will help you report on the plan's financial standing and gain valuable insights into the effectiveness of the program. A well-constructed EBP audit will ensure that your significant investment in employee benefits is actually helping you accomplish your goal of attracting and retaining the best talent.
Assess Your Benefits Offerings
Company employee benefit programs vary widely and it's important to know what yours encompasses so that you can meet your employees' needs while staying within your budget.
Auditing your employee benefits program starts with understanding the benefits and additional perks you offer.
These benefits may include:
- Health benefits
- Paid leave
- Training and development
- Retirement savings
- No-cost benefits
Mandatory Employee Benefits Programs Audits
Employee benefit plan audits are legally required by the Department of Labor to be performed yearly by companies with more than 100 employees. That means that if your plan has more than 100 participants at the start of the plan year, you will have to attach a separate audited financial report to your Form 5500.
The price to pay for failing to audit employees' benefit plans or not mandating the right expert to perform an EBP audit can be dire. As such, you should strive to do the right thing to avoid rubbing the concerned authorities the wrong way.
Who can perform an EBP audit?
Not everyone who claims to perform a plan audit is qualified to do so. Only independent certified public accountants (CPA) are authorized to conduct an audit of employee benefits plans.
Keep in mind that carrying out EBP audits in line with GAAS and ERISA isn't a simple task. A recent survey revealed that about 4 out of every 10 audits had deficiencies. This underpins the need to hire the right CPA.
Here are some things you should consider when searching for a CPA firm for the task:
- Experience in performing EBP audits
- Business mentoring and advise
- Membership, for example, with AICPA
- Proper certification
The Advantages of EBP Audits
Employee benefit plan audits help safeguard your organization's assets from internal errors and employee deception.
But why else are EBP audits important?
The price of an audit failure can be heavy and may cost you:
- Up to $2,194 per day for the failure to file a Form 5500
- $150 a day (up to $50,000) per annual report filing for a deficient auditor's report
- $100 per day (up to $36,500) per annual report filing for deficient financial information
- $10 per day (up to $3,650) for failing to answer a question on Form 5500
It is a requirement by the DOL for companies with more than 100 employees to perform EMP audits, so be sure to comply and avoid consequences that can shake the health of your business.
2. Prevent financial abuse and fraud
How else can you tell your business is doing well financially if you don't allow thorough audits to be performed? Only through these audits will you be able to learn about potential fraud, internal errors, and abuse.
3. Help streamline employee benefits
What benefits do you currently offer employees? It is essential to review from time to time your stand for your employee benefits packages.
Having data that is well analyzed and organized can help you make better decisions regarding employee benefit plans. Your CPA firm should support you in becoming a better manager of both your human and financial resources.
4. Save money
Some businesses see yearly EBP audits as a source of stress and forget they can pinpoint potential areas to save money. It is actually a tool that ensures you see the current well-being of your business.
How to Audit Your Benefits Program
Do you know how to formulate an employee benefits program that works?
Our upcoming course Getting the Most of Your Money: Auditing Your Employee Benefits Program will help you ensure that you are seeking the right information for both a cost-effective and beneficial program.
This course will teach you to recognize the importance of auditing your benefits plan, describe the audit process, and provide helpful tips on how to maintain the program.